VC Investors and Entrepreneurs Speak on Energy Storage

Eric Wesoff is Editor-at-Large at Greentech Media. Prior to joining GTM, Eric Wesoff founded Sage Marketing Partners in 2000 to provide sales and marketing-consulting services to venture-capital firms and their portfolio companies in the alternative energy and telecommunications sectors. Mr. Wesoff has become a well-known, respected authority and speaker in these fields.

His expertise covers solar power, fuel cells, biofuels and advanced batteries. His strengths are in market research and analysis, business development and due diligence for investors. He frequently consults for energy startups and Silicon Valley's premier venture capitalists.

Energy storage remains a missing piece of the modern electrical grid and a pain point for electric vehicles and portable power applications. Venture investors and entrepreneurs have been looking for opportunities in these sectors for a while now -- and progress has been slow.

Moderator Greg Heibel, a partner at law firm Orrick and Orrick, hosted a panel today to look at policy, markets, and why new energy storage technologies have made so little impact to date.

Here are some of the panel's observations:

Abe Yokell, Partner, RockPort Capital, gave the VC viewpoint. He noted that energy storage is hardly a monolithic category and that it contains very distinct sectors and use-cases. Within utility-scale, there's ancillary services and bulk energy storage. Energy storage also comes in behind-the-meter enterprise flavors, as well as EV transportation and energy storage for consumer portables.

Rockport's portfolio includes isothermal CAES firm SustainX, Li-ion battery management systems from Qnovo, and a firm still in stealth.

Yokell noted that the funding environment for cleantech and energy storage is challenging -- many VC firms have allocated their funds to existing companies. And that means that seed funding and round A funding is going to be tough. Strategic investors, which have their own unique set of plusses and minuses, are playing a larger role and are sometimes leading later funding rounds.

He stressed that energy storage is a real business and remains one of the clearest problems on the energy landscape.

Flow battery firms were somewhat over-represented on the panel, with CEOs from EnerVault and Primus Power. Both firms aspire to the large-scale grid storage market. Flow batteries, sometimes called regenerative fuel cells, are a type of rechargeable battery in which electrolyte flows through an electrochemical cell, which in turn converts chemical energy directly to electricity. By re-circulating electrolyte through electrochemical cells, flow batteries promise long cycle lives, though they do tend to suffer in comparison to other technologies (such as lithium-ion) in terms of round-trip efficiency. Other players including Prudent Power, Redflow (Australia), Cellstrom (EU), ZBB, EnStorage (Israel), Premium Power, and Deeya.

Tom Stepien, CEO of Primus Power, realized the need to "make storing electrons cheaper than making electrons." Unfortunately, making electrons from fossil fuels is cheap, and therein lies the challenge for grid-scale storage. All panelists agreed that the competitor for energy storage is natural gas -- a formidable opponent. Stepien suggested a focus on looking at what storage can do that natural gas can't, although he didn't provide a long list of those things. Primus Power's flow battery technology is based on a zinc halogen system with zinc plating and de-plating.

Stepien said that we're in the second or third inning of a nine-inning game and there remains all sorts of waste in the modern electric grid that storage can address. Stepien spoke of de-coupling energy supply from demand and moving away from our current just-in-time energy inventory.

Craig Horne, the CEO of EnerVault, is also going after large-scale energy storage in the 100-kilowatt-and-up range. EnerVault just closed a $15 million funding round led by Mitsui in a fundraising effort that Horne called one of the more difficult things he's ever done.

Contrarian views on energy have been voiced by Jim Detmers, the gentleman who called for the rolling blackouts in the California energy crisis of 2001, when he was the COO of CAISO. Here's what he said about energy storage: "If designed to solve problems on the power system side, yes" -- but then he added the caveat, "All of those battery companies waiting for an instruction -- that's not providing the right value to the system or the ISO."

Policy and an Energy Storage Wish List

When asked for the one lever that might accelerate the energy storage market, Kelly Krpata, Director of the Applied Materials Climate Prosperity Initiative, suggested better financing models for energy storage. Tom Stepien dreamed of a national energy policy, one that doesn't change every four years, and one that enables the U.S. to compete with other nations. Another panelist suggested a storage portfolio standard, mandating that a certain percentage of state load be addressed by an energy storage piece.

Craig Horne suggested decoupling the physical siting of an energy storage system (ESS) supplying a thermal plant's frequency regulation services while the ESS is downstream at the load center where balancing is actually needed -- instead of at the thermal plant. This provides value to the grid (through increased reliability), the ESS owner (through increased revenue), and the market (increased efficiency, as fewer frequency regulation services are needed due to response time and locational improvements).

California did pass AB 2514, a bill that was intended to address energy storage, but was rendered somewhat toothless by the time the utilities and PUC got through with it.

Although Tom Stepien cautioned that such legislation will have trouble being passed given the current congressional deadlock, there is legislation on the horizon that would create an investment tax credit (ITC) for energy storage technologies. The Storage Technology for Renewable and Green Energy Act (STORAGE) Act (H.R. 4096) -- a House companion legislation to S. 1845, introduced by Senator Jeff Bingaman (D-NM) et al., at least opens a channel to discuss incentives for energy storage.